On November 8, the state of Oregon declined to pass through an initiative which would have severely impacted corporate tax rates. The initiative – known as Measure 97 – was targeted toward Oregon-based C corporations which brought in upwards of $25 million in gross sales in a single year. Corporations bringing in $25 million or less would have been unaffected by the measure.

Measure 97 would have compelled C corporations (with sufficient gross sales) to pay an additional tax of 2.5 percent on top of their original rate. However, businesses classified as “benefit companies” – meaning a business which has aims to either help the community or the environment – would have been exempt from the extra tax even if they brought in sufficient revenue.

Rationale

Oregon currently has no sales tax and also has one of the lowest state corporate tax rates in the union. Proponents argued that Measure 97 was a logical step to bring Oregon’s tax policy closer in line with other states. Supporters of the initiative also argued that the increase was needed to raise funds for a variety of public projects, including education and healthcare. If the measure had succeeded at the ballot box, Oregon would have likely received an extra $3 billion annually in tax revenue.

Defeat

Measure 97 was shot down by a clear majority of voters; the initiative received 1,141,677 votes for “no” and 792,094 votes for “yes” (or 59.04 percent vs. 40.96 percent). Opponents cited the fact that the new state corporate tax rate imposed by the measure would have been among the highest in the country.

Interestingly, the battle over Measure 97 was the most expensive ordeal in Oregon’s history. Supporters and opponents of the bill raised a combined total of approximately $42 million in preparation for the ballot.

Measure 97 certainly would have given the state pocketbook a large boost. However, too many people saw its flaws and so Oregonians will have to think of another way to address shortages for public needs.

Back in May, the state government of Connecticut approved a new budget with the goal of fixing a deficit of approximately $960 million. The budget – which was proposed by the Democrats – did not raise taxes but instead addressed the deficit through various spending cuts and layoffs. General fund spending was cut by $821 million, hospital funding was cut by $43 million and state grants to non-profit industries which provide addiction and mental health services were cut by roughly $8.7 million.

The budget took effect on July 1. Opponents stress the cuts to the medical and non-profit industries and highlight the impact of such cuts on Connecticut families. Supporters emphasize the absence of tax increases and point to the fact that difficult decisions were inevitable in order to balance the budget. Though certain negative effects will undoubtedly ensue, the Democratically-sponsored budget was in fact the lone option as the Republicans failed to put forth an alternative proposition.

When the budget passed, Connecticut governor Dannel P. Malloy foresaw as many as 2,500 state jobs being eliminated. Some of these eliminations would result from retirements and other forms of voluntary resignation. The layoffs were projected to occur across a broad range of employment sectors including education, law, medicine and others as well. The layoffs have sparked protests and heated opposition from union leaders. Lori Pelletier, president of the Connecticut AFL-CIO, went so far as to say the following: “A vote for this budget is a vote for laying off rape crisis counselors, corrections officers, nurses, mental health workers, and teachers.”

Though it is certainly not without its unattractive elements, the new state budget of Connecticut appears to be on path with projections and should lead to a balanced fiscal situation in 2017. Connecticut state revenue derives from various sources, several of which are rather volatile, and so only time will reveal whether these projections turn out to be correct. When budgets are greatly off-kilter – as was clearly the case with Connecticut’s budget prior to the passing of this new plan – easy solutions are often impossible to come by. Hopefully economic growth can help relay former state employees into well paying new jobs.